We don't have a spending problem. Period.

A few basic facts everybody seems to have either forgotten or never been made aware of: Government has always spent about 20%, +/- a point or two, of GDP. Government has always taken in about 20%, +/- a point or two, in revenues. The exceptions being times of war or great social upheaval like the Great Depression when revenues increased through savings and war bonds (borrowing) and tax increases. Businesses tax revenues, until 1980, were 5-6% of GDP with individual taxes making up the balance.

What happened? Beginning in 1980 tax reforms have allowed business tax revenues to fall below 2% of GDP and individual tax cuts have reduced government revenues overall to 14% of GDP. The government has also waged two wars, increased Medicare drug benefits, reduced taxes on un-earned incomes, reduced taxes on earned incomes across the board and off-shored most high-paying manufacturing and IT jobs further gutting tax revenues, none of which have been offset by revenue increases of any kind. All this under Republican leadership.

The Republican answer is to cut spending and leave all tax increases off the table. The deficit is currently $1.4 Trillion and the interest on the National debt is approaching $.5 Trillion, so to stop the growth of our debt with spending only we must cut $2 Trillion a year from a 2011 budget of just under $4 Trillion.

That $4 Trillion is divided into Discretionary and Non-discretionary spending. Discretionary spending is money that is voted on in the budgetary process each year and includes Defense, education, transportation, energy, research and development, government salaries, pensions and every other part of government you can think of. Discretionary spending is just under $2 trillion. We could disband the military, withdraw from all wars, NATO, the United Nations, sell all Federal holdings, disband every Federal agency and fire every Federal employee including elected representatives and still not balance the budget. It can’t be done.

Non-discretionary spending is money committed to by law and contract which includes Social Security, Medicare and the rest of the social safety net; also called “entitlements”. That must be where the problem is, right? Not so much. Social Security has a $2.5 Trillion surplus which has been loaned to the rest of Government in the form of special Social Security bonds. Social Security has been supporting the “discretionary spending”. Medicare is a problem because we pay a flat 1.45% of wages into it and medical care costs have increased 10-30% per year. Either fix health care costs or fix what we contribute.

If you want to see a comprehensive way to balance the budget and maintain the safety net read The People’s Budget proposed by the Congressional Progressive Caucus here http://cpc.grijalva.house.gov/index.cfm?sectionid=70

fixed link

It is by no accident that this is so.

Permit me to add: Almost a quarter of that $4 Trillion in expenditures is our $700 Billion defense budget.

Edit: Your link doesn't work.

That Bernanke recently created out of thin air to give to his banking friends.

Oh, yes, I know it was paid back - but the banks paying it back used their pieces of paper, that is, things like CDS' and CDO's and other derivatives.

Sort of like if I used last years' phone books to settle off my student debts. Though at least last years phone books contain some useful information.